ManpowerGroup’s 27.1% return over the past six months has outpaced the S&P 500 by 19.4%, and its stock price has climbed to $38.84 per share. This run-up might have investors contemplating their next move.
Is now the time to buy ManpowerGroup, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Do We Think ManpowerGroup Will Underperform?
Despite the momentum, we’re swiping left on ManpowerGroup for now. Here are three reasons we avoid MAN, plus one stock we’d rather own.
1. Long-Term Revenue Growth Flatter Than a Pancake
A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Unfortunately, ManpowerGroup struggled to consistently increase demand as its $18.38 billion of sales for the trailing 12 months was close to its revenue five years ago. This was below our standards and signals it’s a low quality business.
2. EPS Trending Down
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Sadly for ManpowerGroup, its EPS declined by 17.5% annually over the last five years while its revenue was flat. This tells us the company struggled because its fixed cost base made it difficult to adjust to choppy demand.
3. New Investments Fail to Bear Fruit as ROIC Declines
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
Unfortunately, ManpowerGroup’s ROIC has decreased significantly over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.
Final Judgment
We cheer for all companies making their customers lives easier, but in the case of ManpowerGroup, we’ll be cheering from the sidelines. With its shares outperforming the market lately, the stock trades at 10.1× forward P/E (or $38.84 per share). This multiple tells us a lot of good news is priced in - you can find more timely opportunities elsewhere. We’d suggest looking at an all-weather company that owns household favorite Taco Bell.
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